Allow 50% of pension fund to invest in stocks: PFRDA

We want the state and the central government employees to be allowed to invest more in the equity. They should also get the same exposure to the stock market as the employees of private sector get which is at 50%

–Hemant G Contractor, PFRDA Chairman

New Delhi: In a significant move, the pension fund regulator Pension Fund Regulatory and Development Authority (PRFDA) asked the Union government to increase the limit of government employees' pension funds in the stock market up to 50 per cent.

• The proposal is waiting for the government’s approval
• The NPS funds are invested in government securities, corporate bonds and equities

The pension funds under PFRDA are allowed to invest only up to 15 per cent of the corpus into stocks market. "We want that state and central government employees should be allowed to invest more in equity.

They should also get the same exposure to the stock market as the employees of private sector get which is at 50 per cent," PFRDA Chairman Hemant G Contractor said on Wednesday. Currently, the proposal is lying with the government for consideration and PRFDA is actively following it, he said.

Contractor said it is one of the recommendations of the G N Bajpai committee stating the investment of pension funds into stocks market should be enhanced. PFRDA had set up an expert panel under the chairmanship of ex-Sebi chief G N Bajpai to review investment guidelines for national pension system (NPS) schemes in private sector.

On the rationale behind the proposal, the Chairman said equity in the long run is always better performing than other instruments. The committee has recommended diversifying investment portfolio of NPS scheme into private equity and venture capital funds.

PFRDA regulates NPS, which is subscribed by employees of both central and state governments, besides private institutions and unorganised sectors. At present, NPS funds can be invested in government securities, corporate bonds and equities.

The Centre had introduced the New Pension System (NPS) in January 2004. Total assets managed under NPS are about Rs 82,000 crore, while the private sector's contribution is just Rs 5,000 crore.